Hey Washington… Quit Bickering And Create Some Jobs!

| August 1, 2011 | 0 Comments

Washington’s handling of the debt ceiling crisis can be summed up in one word… disgraceful.  With time running out at the end of last week, it looked like a deal would never get done.

On Friday, House Republicans wasted precious time passing a bill, which they knew Senate Democrats would never agree to.  And for their part, Senate Democrats kept banging their head against the wall by pushing a bill that is a non-starter with Republicans.

All the while, our country’s solid gold AAA rating hung in the balance.

Par for the course in Washington, right?

But then a miracle happened.  After furious negotiations over the weekend, both parties announced Sunday evening a deal had finally been reached.

It’s too bad they had to bring the country to the edge of disaster in the process.  But at least they got a few sound bites to use in the upcoming elections, right?

All kidding aside, Washington’s handling of the debt ceiling issue is a perfect example of what’s wrong with our government.  These politicians are clearly more concerned about posturing for the upcoming election than they are about doing what’s right for the country.

This kind of behavior is completely unacceptable in my humble opinion.

And what’s even more discouraging… Congress continued playing games even after Friday’s extremely negative GDP report.  In case you missed it, GDP increased at a meager 1.3% annual rate in the second quarter.  That’s well below the 1.6% growth rate economists were expecting.

What’s more, it turns out the economy grew markedly slower from January through March than previously thought.  First quarter GDP was just revised sharply lower from 1.9% to a paltry 0.4%.  In other words, the economy just barely avoided coming to a grinding halt.

That’s not good… to say the least.

Clearly, the US economic recovery is much more fragile than anyone believed.

And that’s why Washington’s handling of the debt ceiling crisis really grinds my gears.  It’s distracting our leaders from focusing on what’s most important… fixing our economy.  We have pressing issues to deal with if we’re going to get our economy back on track.

And right at the top of the list is creating jobs for our fellow Americans who are out of work!

It’s time to face facts.  The government’s efforts to stimulate the economy have failed miserably.  Unemployment remains over 9%, and instead of declining… it’s actually moving higher.

As you can see, unemployment hit a high of 10.1% in October 2009 before moving down to a low of 8.8% in March 2011.  Since then, however, the rate has been moving steadily higher, reaching 9.2% in June.

No doubt about it, the time is now to do something about the lack of jobs in this country.

Unfortunately, it doesn’t seem like anyone in Washington has a clue about where to start.  Lucky for them, a Princeton professor of economics and public affairs has offered up a starting point free of charge.

Alan Blinder, who is also a former vice chairman of the Federal Reserve, recently proposed a clever way to give companies an incentive to hire more employees.  It’s simple, straightforward, provides accountability, and should be palatable for Democrats and Republicans alike.

Here’s how it would work…

Blinder proposes giving companies a tax deduction equal to a percentage – he suggested 10% – of any increase in their social security wages.  For example, let’s say a company hired workers and increased their social security wage base by $100 million.  Under Blinder’s proposal, the company would qualify for a tax credit worth $10 million.

Sounds like a win-win-win to me.

The company would expand its business and get a nice tax break for their effort.  A large number of previously unemployed individuals would get to go back to work.  And the unemployment rate would start moving lower, which is essential for a lasting economic recovery.

Now offering a tax credit to firms that boost their payrolls is not a new idea.  What’s different about Blinder’s proposal is how the tax credit would be calculated.

He suggests basing the tax credit on social security wages.  By using social security wages as the base, we would accomplish two important goals.

First, it would make administration of the tax credit simple to do.  As Blinder mentions in an opinion piece published in the Wall Street Journal, “[e]very company already reports this number to the government, and it’s next-to-impossible to ‘game’ it without committing outright fraud.”

Second, it would make it easy to ensure companies are actually hiring new workers and not just raising executive pay.  All Congress would have to do is limit the tax credit to earnings under $106,800 per year.

While I don’t often agree with the liberal economist crowd, I have to admit this sounds like a good idea.  It’s an effective way to create jobs our economy desperately needs.  And the mechanism is just what Republicans like… a tax credit for business owners.

If this sounds like a good idea to you, tell your elected representatives in the House and Senate about it.  Maybe, just maybe, they’ll get the message it’s time to stop playing politics and focus on getting people back to work.

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Category: Bonds

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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